Working-Class Power and the Taxation of Current Earnings: Danish Pay-As-You-Earn Income Tax in Comparative Perspective

The figure of 11% is the average for the 15 countries listed in Fig. 1, computed from OECD, Revenue Statistics, 80. The comparable figure for general consumption taxes, including value-added tax, is 6%: idem., 124.

Haig, “Concept of Income,” 7. If annual income is an annual rate of change between year t and year t + 1, we might conceptualize current income as an instantaneous rate of change, on analogy to the derivative of a continuous function. But no actually existing income tax system defines current income in this fashion, for two reasons. First, no government is capable of collecting information about every individual’s economic power on a truly continuous basis. Second, even if this were possible, “current income” would be unobservable even in principle: given that the future is not observable, the present defines a point on the curve of economic power with respect to time at which the slope is literally undefined. Much more could be said about the ritual processes by which certain provisional numbers come to be accepted as representations of “current income.” But for the purposes of this paper, I am focused on the conditions under which any such approximation is institutionalized as an appropriate basis for collecting taxes.

See, Lampland, “False Numbers,” 378.

See, inter alia, Tilly, “War Making and State Making”; idem., Coercion, Capital, and European States; idem., “Extraction and Democracy.”

Martin, Mehrotra and Prasad, “The Thunder of History,” 14. The theoretical assumptions of this chapter may also remind a reader of Walter Korpi’s “power resources theory”; see Korpi, “Power Resources and Employer-Centered Approaches.” Two important differences are (a) the greater importance here accorded to the geopolitical interests of states and their citizens, and (b) the assumption that workers and their organizations sometimes struggle not only to realize redistributive goals but also to realize particular cultural ideals of just administration.

Steinmo, Taxation and Democracy; Levi, Of Rule and Revenue; see also Scheve and Stasavage, Taxing the Rich.

See Leimgruber, “Protecting Soldiers, Not Mothers.”

Sources include Board of Inland Revenue, Income Taxes Outside the Commonwealth; idem., Income Taxes Outside the United Kingdom; Commerce Clearing House, Tax Systems of the World; Herler, “Den svenske Skatteopkrævningsreform”; Levi, Of Rule and Revenue; Leibfritz and O’Brien, “The French Tax System,” 33; Lent, “Collection of Personal Income Tax at the Source”; Neumark, Theorie und Praxis; and Torgersen, “Skatt av. årets inntekt.”

Petrick, “Das deutsche Okkupationsregime,” 755–774; idem., “Einleitung,” 18–61; Nissen, “Adjusting to German Domination,” 98–138; Liberman, Does Conquest Pay?, Chap. 3; Giltner, “In the Friendliest Manner,” Chap. 1.

Some scholars have suggested that this rare concession was attributable to the special place the Danes and other Nordic peoples enjoyed in Nazi racial ideology (see, e.g., Liberman, Does Conquest Pay?, 39). The record suggests, however, that more pragmatic considerations of state were paramount. Consider the comparative evidence: in the first place, other Nordic states did not get off so easily. At Hitler’s orders, the Nazi state drew a sharp distinction between the “friendly” occupation policy toward Denmark and harsher rule in Norway, which was considered “enemy territory.” In the second place, the initial terms that the German government offered to the other small, neutral countries of Europe—which were below Scandinavians in the hierarchy of races envisioned by Nazi ideologues—resembled the terms that it offered to Denmark (Giltner, “In the Friendliest Manner,” 6, 33, 170–174). Indeed, it was precisely for this reason that a lenient approach to Denmark was valuable to the German imperial project: the privileges accompanying the “protectorate” status could be held up before the other small neutrals as an example of the benefits that collaboration could bring (Petrick, “Das deutsche Okkupationsregime,” 774).

Wendt, Besættelse og Atomtid, 20–21; Hansen Henriksen, Velfærdsstaten, 17.

Gelting, “Pengepolitiken,” 238–239; Wendt, Besættelse og Atomtid, 245; Hansen and Henriksen, Velfærdsstaten, 20.

Kaarsted, Krise og Krig, 241–243; Wendt, Besættelse og Atomtid, 165–177.

Herler, “Den svenske Skatteopkrævningsreform,” 7.

Böhme, “Principal Features of Swedish Defence Policy,” 119–134; Fritz, “A Question of Practical Politics,” 95–118.

Molin, “Parliamentary Politics during World War II,” 305–331; Nissen, “Adjusting to German Domination.”

Nørby Johansen, “Denmark,” 203, 214–218; Hansen and Henriksen, Velfærdsstaten, 220–223; Esping-Andersen, Politics against Markets, 168–169.

Skattelovskommissionen, Betænkning, 1. Del, 174; idem., “Referat til finansministeren,” 3–4; Philip, Skattepolitik, 262. For comparative data on the size of the Danish petit bourgeoisie in this period, see Esping-Andersen, Politics against Markets, 53.

Skattelovskommissionen, Betænkning, 1. Del, 153, 183; Herler, “Den svenske skatteopkrævningsreform,” 19–20. A similar system was also proposed in the United States in 1938 as a solution to the administrative problems of collecting social security payroll taxes for agricultural workers (Lieberman, Shifting the Color Line, 97–98).

The Danish employers’ association, unlike its Swedish counterpart and in contradistinction to the stereotype of Scandinavian corporatism, was dominated by small employers. The average number of employees for its member firms at the end of World War II was just over ten (see Dansk Arbejdsgiverforening, Arbejdsgiver foreningen, 2, 363).

Johansen, “Denmark,” 200–203; Baldwin, Politics of Social Solidarity, 152–153, 226–227; Christensen, Socialpolitiske strategier, 106–107.

Krag and Andersen, Kamp og Fornyelse, 275; Lidegaard, Jens Otto Krag, 162. Kaarsted, De Danske ministerier, 299, suggests that in addition to these motives, social democrats may have also favored PAYE taxation because it would provide an excuse to abolish the skattefradragsret, a deduction that many in the party saw as a violation of the principle of taxation according to the ability to pay. Although this was doubtless a motivating factor for some party activists, the party’s original proposal for PAYE taxation did not propose to eliminate the skattefradragsret. Finance minister Poul Hansen judged that a hard line against the popular deduction was either too provocative to put before the public, or else too extreme to demand as a starting point for negotiation with the bourgeois parties. See Krag and Andersen, Kamp og Fornyelse, 257–258.

Folketingsårbog (1964–1965): 425; Kaarsted, De Danske ministerier, 299–300; Krag and Andersen, Kamp og Fornyelse, 278–282.

Folketingstidende (1965–1966): cols. 671, 682–683, 688, 690–691, 695–697, 711–713. Kaarsted, De Danske ministerier, 299, 310; Krag and Andersen, Kamp og Fornyelse, 316. On the origins of these minor parties, see Nissen, Landet blev by, 217–218, 307–308.

Kaarsted, De Danske ministerier, 324–325; Krag and Andersen, Kamp og fornyelse, 311, 325.

See, for example, Krag and Andersen, Kamp og fornyelse, 305, 321.

Lidegaard, Jens Otto Krag, 307, my translation from the Danish; the poster is also reproduced in Hammerich, Det store flip, 19. See also Nissen, Landet blev by, 315.

Mader, SF under “det røde kabinet,” Chap. 5; Rasmussen and Rüdiger, Tiden efter 1945, 195–197.

Krag and Andersen, Kamp og fornyelse, 289.

Folketingstidende (1966–1967): cols. 364, 368–370, 375, 377–378, 3109; Kaarsted, De Danske ministerier, 339.

Indeed, some estimates imply that more than 100% of the personal income tax burden was borne by wage earners, inasmuch as personal income tax deductions rendered the aggregate personal income tax yield from capital income negative, at least until tax reforms of the 1990s. See Ganghof, “The Political Economy of High Income Taxation,” 1068.

This measure is calculated by computing left party cabinet seats as a proportion of all cabinet sets, and then summing over years. So, for example, if left parties held 0.5 of the cabinet seats this year, and 0.75 next year, then the cumulative annual share over the two year period would be 1.25. This measure is thought to combine the extent and duration of left party rule. I employ it here to facilitate comparison of these results with the quantitative literature on social policy development in rich democratic countries.

K. Torgersen, “Skatt av. årets inntekt,” 1–2, 5.

Tillæg A til Folketingstidende (1966–1967): 112–160; see Mackie and Rose, International Almanac of Electoral History, 367, 371.